The Bureau of Labor Statistics’ consumer prices report is expected to show inflation pressures were abating in September, if only marginally.
Headline CPI is seen rising 0.3% on the month, down from 0.6% in August, which would take the annual rate to 3.6%.
Core inflation, which strips out volatile energy and food prices, is expected to have also risen 0.3% in September. On an annual basis that would leave core CPI at 4.1%, its lowest level in two years.
That would be welcome news for the U.S. central bank, but the path to lower inflation, and a return to the 2% target, looks trickier from here.
The threat of higher energy prices following the outbreak of a war between Israel and Palestinian militants is all too real, even if the immediate market reaction has been relatively muted.
Oil rose by as much as 4% at one point on Monday, but has since returned to levels it was at before Hamas militants crossed the Israeli border on Saturday.
Natural gas prices in Europe and the U.S. are both holding near multi-month highs as there is already evidence that supply could be affected, after the Israeli energy ministry instructed Chevron to shut-in production at its Tamar facility.
Policymakers around the globe are likely to signal they will look through any short-term boost to inflation if the conflict were to escalate, but the path back to 2% could still take longer than previously thought.
